Correlation Between STL Technology and Chaheng Precision

Can any of the company-specific risk be diversified away by investing in both STL Technology and Chaheng Precision at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining STL Technology and Chaheng Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STL Technology Co and Chaheng Precision Co, you can compare the effects of market volatilities on STL Technology and Chaheng Precision and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in STL Technology with a short position of Chaheng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of STL Technology and Chaheng Precision.

Diversification Opportunities for STL Technology and Chaheng Precision

-0.1

Correlation Coefficient

STL Technology  Chaheng Precision

Good diversification

The 3 months correlation between STL and Chaheng is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Chaheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaheng Precision and STL Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on STL Technology Co are associated (or correlated) with Chaheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaheng Precision has no effect on the direction of STL Technology i.e., STL Technology and Chaheng Precision go up and down completely randomly.

Pair Corralation between STL Technology and Chaheng Precision

Assuming the 90 days trading horizon STL Technology Co is expected to generate 2.11 times more return on investment than Chaheng Precision. However, STL Technology is 2.11 times more volatile than Chaheng Precision Co. It trades about 0.19 of its potential returns per unit of risk. Chaheng Precision Co is currently generating about -0.06 per unit of risk. If you would invest  3,035  in STL Technology Co on October 4, 2024 and sell it today you would earn a total of  4,135  from holding STL Technology Co or generate 136.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

STL Technology Co  vs.  Chaheng Precision Co

STL Technology

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Chaheng Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chaheng Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chaheng Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with STL Technology and Chaheng Precision

The main advantage of trading using opposite STL Technology and Chaheng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STL Technology position performs unexpectedly, Chaheng Precision can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Chaheng Precision will offset losses from the drop in Chaheng Precision's long position.

The idea behind STL Technology Co and Chaheng Precision Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.